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Bad Policy? 1% tax on investment a drawback, could impact govt debts-- SEC

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The decision by government to impose 1% tax on local investors is a drawback to efforts to get more people in the financial system, Head of Audit and Risk Management at the Securities and Exchanges Commission (SEC), Emmanuel Mensah has said, adding it could impact on government’s external debts.

“This will really draw back the fight that we have had to get more and more people into the financial system. The more we get people to invest in products like the mutual funds, the more we get people from the informal to the formal sector; I think that this tax imposition should be looked at again,” he said.

The tax imposition on interests is part of provisions in the new Income Tax Act, 2015 (Act 896) which came into force on January 1, 2016.

Under the new law, local investors were required to pay 1% Withholding Taxes on their returns. This means that all interests accruing from investment in bonds, treasury bills and shares will be reduced by 1%, an amount which will be paid to government.

According to Mr. Mensah, “Sometimes the government thinks when it needs money it can go to the external market to borrow and therefore what happens to the local market if this is not done. But it is, because eventually you did not build your local base for it to be strong… we strongly expect that the financial sector grows and become very strong.”


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